Junior Achievement’s 2011 Business Hall of Fame Inductees
In Track and Field, sprinters like Usain Bolt are celebrated as the “Fastest Men on Earth.” But in the world of business, it is usually the ones who win the marathons that are regarded as having made the most significant impact. Walter Gatti of Tensor Engineering and Fred Sutton of Sutton Properties certainly qualify for this kind of recognition. It is an admiration that exists in the eyes of the community, but equally if not more importantly, by those who work with them and work for them.
On Saturday, March 5, Junior Achievement of the Space Coast will honor Gatti and Sutton as their 2011 inductees into the Space Coast Business Hall of Fame, an honor bestowed to a select handful of local business leaders since the Hall was established in 1986. I recently sat down with both honorees for an invigorating discussion on their careers and business philosophies.
SCB: If you were starting over again what industry would you want to be involved in and why?
FS: I think I would be in exactly the same business. I’m a native Floridian and very early on I appreciated the challenges developers had and the risk/reward opportunity appealed to me. I have loved being a developer my entire career. Needless to say there are a number of things I’ve learned about development that I would change (laughing). For instance, I would alter my approach to risk. When you have to be a developer, in other words be the one who is assuming the liability, that is not a position I would want to be in again. Right, Walter?
WG: Absolutely, many of the successful developments in this area were taken over when the original developer failed, like Suntree, Lansing Island and The Sanctuary. This was a point I made when talking to the governor recently. I used to do development work, but now, from the time of conception to execution and completion, it is so long due to the labyrinth of local and state agencies that are involved in the process. The economic climate may have completely changed and the costs folded into those delays are prohibitive.
FS: Fifteen years ago we changed our approach. When we started we began with an idea, with very little in terms of an economic nest egg to drive that concept. What we brought to the table were a lot of man hours and the assumption of risk. We built and prayed people would come. That approach worked because we picked Palm Bay beginning in the 1970’s. The community exploded from a few thousand people to over one hundred thousand today. There was a period there when we didn’t have to be extremely bright, because we had a great market. When the downturns come in the economic cycle, it is better to not develop, but to sit on the sidelines and watch. We now deal with tenants like Harris, DRS, Ricoh, and LiveTV, which have well-established credit histories and we will build for them with long-term leases.
SCB: Could you have built such a business – that is, one in which you are dealing with clients like Harris and DRS – had you not taken those early risks?
FS: That is a good point, but there was a period when we had established ourselves with credit tenants, yet continued in speculative ventures that put us at considerable, and in some ways unnecessary, risk involving land loans and lines of credit. I won’t do that again.
SCB: How did you select the field you went into?
WG: I pursued the business arena that I found I had a natural talent or ability in. My primary incentive was I wanted to be better, personally and professionally. Sometimes, that is difficult when you are working for other people, who operate in a particular way, so I went to work for myself. If I had to sit down and determine what field I would pursue today, I’m not sure I could do that. That’s the biggest challenge for a young person now, because some of the great businesses we see today, no one dreamed of fifteen years ago. Who thought people would be making billions on Facebook? The same is going to be true ten to fifteen years from now.
FS: That is so true.
WG: I suppose that is one of the appealing aspects of real estate, people will always need a place to live and work.
FS: For me it was a little different. When I was in graduate school, my brother, who was a physician, and I got together to discuss what I wanted to do. I decided I wanted to be a real estate developer, so we looked at the best means to achieving that end, realizing many didn’t make it. We agreed I needed to get the best training available, so after graduating I went to work for one of the largest engineering and architectural firms in the country, Reynolds, Smith and Hills. I was involved in the planning department doing economic analysis and feasibility studies; we did the original projections for Disney on their attendance. I was able to work on some of the largest projects in the world, all of which belonged to other people. As I moved up through that organization I learned a lot and I made some mistakes; fortunately that part of my education was paid for by other people (everyone laughs)!
SCB: Is that one of your key philosophies?
WG: It is one of mine!
FS: Coming to this area was the result of market studies I had done. I wanted to be in Florida, but where? Harris, then Radiation, was positioned to expand, but there was nothing around it. There were hundreds of acres contiguous to Harris that were vacant, which we bought for $3,000 an acre. We got it rezoned for multifamily use and began by building apartments for the young engineers and technicians Harris was bringing into the community. Surprisingly, no local lenders would loan us money to develop. Therefore we went to Cleveland, OH where Harris was headquartered. We approached lenders there and all of our initial projects were funded by banks in Cleveland.
WG: Wow, that is amazing! I always sort of flew by the seat of my pants. There is one element that you have to factor into that analysis, planning and execution scenario . . . and that is luck!
SCB: What are the key elements or cornerstones to your business philosophy?
WG: You have to love what you do; you need a passion for it. If it isn’t a fire inside you, when the difficulties and challenges come, you are likely to collapse or bail. Also, there has to be a desire to be the best you can possibly be, to want to be continually growing and learning; to strive for perfection, even though you know you won’t fully attain it. If you settle for mediocrity you have already failed.
FS: I agree with Walter, if you have that passion, your employees are going to know it and ultimately it is those employees that make your company succeed or fail. It might just be the maid who cleans the restrooms that may not realize it, but we try and communicate that to her, because if she doesn’t do her part the whole building is affected and that is a reflection of who we are.
WG: I also believe in setting an example. I am in here at 6 a.m. every morning and I stay until 9 p.m. at night. Therefore, when I ask people to do whatever is necessary to get the job done, right and on time, that example is set by me; I don’t call in to check on them from the golf course.
FS: We have the same approach. I think integrity is the other factor. If you don’t have it, that is going to permeate your whole organization. Whatever you are, it is going to trickle down to your team.
WG: Yes, integrity and honesty are crucial. We have been low bidder on many jobs and the company will call us to begin work the next day, without any formal contract being signed. Just a verbal understanding that what I say I can deliver, I deliver. We also have layers of checking and re-checking to make sure everything we send out is correct. Also, many of the companies we work with have huge disincentive penalties attached to a project, some up to $100,000 a day. That is strong motivation to have things right and on time; if you are early you make money, if you are late you lose.
SCB: What do you look back on as the key or pivotal decision or tipping point that enabled you to be where you are today?
FS: When we closed our first loan, for an apartment building in Palm Bay, with a bank in Cleveland, I knew we were on the move and the project would be successful. Those apartments rented out like hotcakes; we had a two-year waiting list. Until then, though, I had the aura of confidence, but inside I was nervous.
WG: I shared that confidence, along with the insecurity. I knew, though I crossed a threshold, I would have to work twice as hard to get it done. Too much confidence can be a liability, you have to recognize that there are downsides and you have to factor those into the equation. Having a plan B is an important part of the strategy.
FS: I am more conscious of those downsides now than when I was younger.
WG: Absolutely, you have these great deals, but you realize there are equally great risks involved.
SCB: Do you think that is because now you have more to lose?
WG & FS: Definitely!
WG: Relatively speaking, I have everything I want. Getting more isn’t going to change my lifestyle; it is losing what I have that I want to avoid. I took more risk early on, because I had nothing to lose. I worked hard to build up enough cash so I didn’t have to borrow. The most revolutionary step in my business journey was I saw the advent of the computer when they were first developed. I realized that what we were doing by hand, both calculations and drawing, could be done exponentially faster on computers. I knew this was going to be the future. Of course, I had to virtually write my own programs, and I leased an IBM 1130 that had 8K, 4K operating system and 4K memory, for $700 per month. Once I mastered the programming, overnight we were light years ahead of everyone else and could deliver our products much faster, plus we were seen as being not only fast, but innovative. That innovative approach has never stopped; if you aren’t moving forward you are going backwards. There is no such thing as standing still.